April 14, 2000: At the height of the dot-com boom, online grocers were a hot business model that was dominated by WebVan Group Inc., which had raised almost $1 billion in capital. Although the Silicon Valley-based chain was better known, it wasn't the first in the business. An earlier entrant, Peapod Inc., had been selling groceries online in the Chicago area since 1989. However, its efforts to expand during the dot-com boom, and keep pace with new (and in the case of WebVan better funded) rivals had proved expensive and nearly bankrupted the publicly traded company by 2000, leading it to seek help from its partners.
Unlike WebVan, which ran its own fulfillment centers, Peapod instead partnered with supermarket chains to provide fulfillment. Its leading partner was Dutch retail giant Royal Ahold NV, which operates the Stop & Shop and Giant chains. Rather than letting Peapod shrivel on the vine, Ahold agreed to pay $73 million to acquire 51% of the troubled Internet grocer. The Dutch giant also received warrants to acquire an additional 24% of outstanding shares, and it agreed to provide a $20 million revolving line of credit.
Supermarket analyst Andrew Wolf of Richmond, Va.-based Scott & Stringfellow told The Daily Deal at the time that the purchase price was not cheap, considering that Chicago-based Peapod is in difficult financial straits. Even so, Royal Ahold only paid two times 1999 sales for Peapod, Wolf said; rival WebVan at the time traded for nearly 9 times expected 2000 sales.
"This is a speculative issue that could be a home run or could be a strike out," Wolf said, noting that it remains unclear whether Peapod will become a dominant online grocer.
About a year later, WebVan went bankrupt as it buckled under the expense of owning and operating its own fulfillment centers. But Peapod continued to deliver groceries. Today, Peapod is a wholly owned unit of Royal Ahold and available in most areas where Stop & Shop and Giant stores operate. As for WebVan, it is now an Amazon.com Inc. Webstore that sells nonperishable groceries. - Matthew Wurtzel
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